Improving the performance of manufacturersA Confederation of British Industry case study

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Page 3: The importance of manufacturing to the economy

The UK has a long history of manufacturing dating back to the industrial revolution of the late nineteenth century when Britain was considered to be the workshop of the world. Historically, Britain’s manufacturing base was centred on heavy manufacturing industries such as shipbuilding. However, there has been a seismic shift in manufacturing over the last fifty years in terms of technological advancement. This has affected the ways in which goods are produced with new processes and automation.

The influence of manufacturing goes far beyond the direct contribution to national product and employment. Manufacturing is a global business underpinning all economic activity. Spending on goods accounts for more than half of all consumer expenditure, whilst manufacturing goods makes up around two-thirds of all UK exports. The UK workforce creates 4% of the world’s gross domestic product and 6% of the world’s exports, from a nation with one per cent of the world’s population.

Adding value

Essentially, value can be added to goods through:

increasing the quality and specification of the product

providing superior levels of service in providing the product

enhancing the image of the product through marketing.

All these measures serve to differentiate the product from those offered by competitors. In the face of increasingly competitive markets and ever more demanding consumers, the ability to add value to products is crucial to future prosperity.

The importance of this is reflected in an increase in Gross Value Added from manufacturing in the UK. This figure has increased from £110,000 million in 1989 to around £148,000 million in 1997. Added value is at the heart of business activity - value is added at each stage of the production process. In order to remain competitive, companies need to be constantly innovating and responding to rapidly changing market needs. The value adding process is detailed within the figure below.

Confederation of British Industry | Improving the performance of manufacturers